The FCA has recently conducted a review of how principal firms are meeting its enhanced Appointed Representative (AR) rules introduced in December 2022.
The review involved a telephone survey with 251 principals and in-depth assessments of documentation from 23 firms.
The findings highlighted both areas of good practice and areas for improvement to help principal firms effectively monitor their ARs.
Good practice included the use of clear documentation to show compliance with the FCA’s enhanced rules, increased due diligence when onboarding ARs and a broad range of checks and information to oversee and monitor ARs’ activities.
Some firms however failed to comply fully with the new rules and adopted a "minimalist" approach, relying on basic information like website checks, or using self-declarations from their ARs in order to demonstrate effective oversight. Other key findings included:
20% of principals did not carry out a required self-assessment or annual review of their ARs.
50% of all principals are not regularly reviewing their AR agreements.
A third of principals were not using data or management information to keep tabs on whether ARs were acting within the scope of AR agreements.
Most firms haven't changed their AR onboarding or termination procedures since the new rules were introduced almost 2 years ago
Jane Savidge, Interim Head of Department for Appointed Representatives said:
Some firms have been embedding our rules well, but some aren’t getting the basics right and are taking a ‘bare minimum’ approach.
Following the review the FCA has been in contact with with all firms who took part, and will take decisive action where it sees principals not meeting the required standards in the future.
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